The monthly chart shows that SPY is holding a strong support of 419. On the chart, you can see this month’s strong ongoing pullback from 450 and a hold of that pullback in the support 419-429 zone. Only a break below 419 will tend to invalidate the upside extension in the measured fifth wave long-term and short-term.
The Weekly SPY chart reveals the ongoing wedge flag formed just beneath a strong resistance 456. A break below 419 is required to invalidate the upside extension and deny the fifth wave continuation higher, and we can experience a lot of swings as we move forward in the next week. It is advisable to position yourself in just one trade direction and not to try to catch every swing.
As the famous trader says…
“The core problem, however, is the need to fit markets into a style of trading rather than finding ways to trade that fit with market behavior.”
How to trade this?
It is a fact that a strong upside support for Q4 is 419. If we get a confirmed bounce from here and a break above the 440 we could see another test of 460. Near-term, long-trade entries have a higher probability of success. We can open the long trade here with a bit of risk and stop the loss below 419. You can trade this price action with the options as well.